The health-care and biotechnology sectors can expect to prosper from angel money in the next six months.

Sixty per cent of Canadian venture capitalists (VCs) expect the overall economic climate to improve in this period.

This rosy outlook, which is the highest level of confidence expressed by Canadian VCs over the past two years, is drawn from the eighth Canadian Venture Capital Confidence Survey released last week.

The quarterly survey by professional services firm Deloitte and the Canadian Venture Capital Association (CVCA) shows Canadian venture capital investment soared by 52 per cent in the third quarter compared to Q2 levels. In contrast, the U.S. saw an eight-per-cent decline in dollars invested in the same period.

The findings reaffirm previous survey results indicating there was little room remaining on the downside and that the Canadian market was on its way to recovery. Medical/health-care and biotechnology sectors are the most likely to prosper in the upcoming months as 47 per cent and 46 per cent of VCs expect an increase in the amount of activity in these sectors respectively, compared to 39 per cent and 36 per cent in the second quarter of 2003.

Competition for new investment opportunities is stiff as the number of respondents allocating more than half their funds for new investments rose to 38 per cent in the third quarter of 2003, compared to 23 per cent in Q2.

“I am cautiously optimistic,” said Robin Louis, president of the CVCA.

“The uptick in investment activity in Q3 is in the right direction, but the absolute level is still not large.”

While there is more deal activity, the flow of investment opportunities is still not at the level the CVCA would like to see, he added.

According to the survey findings, a lack of quality deals is the primary challenge for VCs, as the number of respondents indicating this challenge as a major concern doubled to 27 per cent from the previous quarter (14 per cent).

The Canadian Venture Capital Confidence Survey was conducted between October 23, 2003 and November 5, 2003 and surveyed more than 500 professionals in venture capital and private equity firms across Canada.

The Canadian Venture Capital Association (CVCA) was founded in July 1974 and is the trade association that represents the venture capital industry.